Monday, August 18, 2014Last Update: 11:55 AM PT

Barnes & Noble Loses Bid for Arbitration on Appeal

PASADENA, Calif. (CN) - Hyperlinked terms of use will not prompt arbitration of claims against Barnes & Noble over canceled Internet orders, the 9th Circuit ruled Monday. Kevin Nguyen sued Barnes & Noble in 2011 after the bookseller canceled his order for two HP Touchpads. The retailer had planned to sell off the discontinued tablets in an online fire sale but oversold the items after underestimating consumer response to the heavy discounts. After Barnes & Noble successfully removed the putative class action to federal court, it argued that Nguyen was bound by the terms of use on its website - buried under one of many hyperlinks on each website page - and moved to compel arbitration. Nguyen argued that he could not be bound by an arbitration provision he never saw. U.S. District Judge Josephine Staton agreed and dismissed Barnes & Noble's request. On Monday, a three-judge panel with the 9th Circuit in Pasadena affirmed that no valid arbitration agreement existed between the parties. Barnes & Noble's mistake was to use "browsewrap" rather than "click-through" agreements - which would have required Nguyen to actively agree to the terms, according to the 18-page ruling. "Were there any evidence in the record that Nguyen had actual notice of the terms of use or was required to affirmatively acknowledge the terms of use before completing his online purchase, the outcome of this case might be different," Judge John Noonan wrote for the court. "Indeed, courts have consistently enforced browsewrap agreements where the user had actual notice of the agreement. Courts have also been more willing to find the requisite notice for constructive assent where the browsewrap agreement resembles a clickwrap agreement - that is, where the user is required to affirmatively acknowledge the agreement before proceeding with use of the website." In Nguyen's case, however, Barnes and Noble buried its terms of use under hyperlinks the man never clicked on and was never told to read. The panel also rejected the bookseller's contention that the placement of hyperlinks on every webpage and near buttons used to make online purchases was sufficient to put Nguyen on notice. "In light of the lack of controlling authority on point, and in keeping with courts' traditional reluctance to enforce browsewrap agreements against individual consumers, we therefore hold that where a website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on - without more - is insufficient to give rise to constructive notice," Noonan wrote. "While failure to read a contract before agreeing to its terms does not relieve a party of its obligations under the contract, the onus must be on website owners to put users on notice of the terms to which they wish to bind consumers. Given the breadth of the range of technological savvy of online purchasers, consumers cannot be expected to ferret out hyperlinks to terms and conditions to which they have no reason to suspect they will be bound."